The British stock market fought a losing battle to shrug off the effect of international factors yesterday, as it began a week which should be dominated by corporate results. Concerns about the outlook for world interest rates, after a weekend speech from Mr Alan Greenspan, chairman of the Federal Reserve, was one constraint on investors.
Fund managers are generally cautious at the moment. The Merrill Lynch survey of UK investors found that sellers of domestic equities outnumbered buyers by 12 percentage points, with many switching to gilts. Buyers of UK bonds outnumbered sellers by 24 points, the survey's most bullish reading since December 1995.
However, Wall Street rode to the rescue in the afternoon, as an early 50 point rise in the Dow Jones Industrial Average helped the FTSE 100 index off its lunchtime lows.
By the close, Footsie was nine points down at 4,985.2. Small and medium-sized stocks outperfromed the leaders, with the 250 index gaining 5.1 to 4,686.1 and the SmallCap index rising 8.2 to 2,278.3.
It was a very un-manic Monday in trading terms, with only 465 million shares dealt by the 6 p.m. count, of which 60 per cent was in non-Footsie stocks.
The day started on a mildly positive note, helped by a recovery in Asian stock markets. In early trading, Footsie inched close to the 5,000 mark - which it had surpassed a couple of times last week - but failed to breach the barrier. Its peak for the day was 4,999.8.
The initial focus was on the UK economy with the consensus view - that manufacturers were struggling whilst the consumer sector was racing away - taking another knock. After last week's weaker-than-expected survey of retailers from the Confederation of British Industry, yesterday saw some surprisingly robust industrial data.
Manufacturing output rose 0.4 per cent on the month while industrial production, which includes energy, managed a 0.6 per cent gain.
The effect on the markets was softened by the output prices numbers, which rose 0.1 per cent on the month, in line with expectations. Gilts took heart from those figures, with the benchmark 10 year issue around a quarter of a point higher.
Mr Philip Isherwood, UK strategist at Dresdner Kleinwort Benson, said: "It looks to me as if the data are beginning to indicate that there will not be a runaway boom. The UK is the only world market where we have a peak in the base rate forecast in sight, with a downward trend thereafter, and that underpins the market."
On the corporate front, there was some further rebound in exporting stocks, on the back of sterling's recent weakness. But the main excitement was in British Energy, where screen prices had to be removed for two hours, as some dealers became confused about the timing of the stock's shift from partly-paid to fully-paid status.
